Mittwoch, 30. Oktober 2013

Bitcoin's Revolution Is Over

Source:Pandodaily

Bitcoin's Radical Days Are Over. Here Is How to Make It Mainstream.by David Wolman, WIRED

Done right, it could
put small ecommerce sites on a level playing field with the likes of Amazon and
Apple. Instead of running from Bitcoin, we should commandeer it from the
radicals and make it work for the rest of us.

This cashlike
quality largely results from Bitcoin’s fulfillment system. Picture a
19th-century shopkeeper’s ledger. Bitcoin works similarly, except that instead
of the ledger sitting on one person’s desk, Bitcoin’s ledger—called the “block
chain”—is distributed over the entire network. There’s a shared record of every
Bitcoin-denominated transaction ever, with the user info concealed by
encryption. So while all Bitcoin network activity is essentially public (to
protect against double spending), identities are private.

t’s time to empower
a central authority to help regulate Bitcoin as it grows. There’s already some
precedent for such a move: Just this past summer, a group called the Digital
Asset Transfer Authority formed to establish guidelines for digital currencies,
including safeguards against money laundering. And leadership, despite all the
rhetoric about decentralization, has already proven crucial to Bitcoin’s
survival.

You still don't understand bitcoin in a few fundamental
aspects, and that's inexcusable at this point.

Mining is the act of
confirming transactions. Miners get rewarded for this activity in two ways, by
the block reward and by the transaction fees. Currently the block reward is the
majority of the compensation, but that is set to change in the next 4 years as
the block reward tapers off, and, inevitably, transaction volume and fee goes
up.

Mining isn't
"inefficient". It's exactly as efficient as it needs to be. This is
because it uses a concept called "proof of work". This is cruical to
the security of the network as well as to the economic viability. Proof of work
combined with the mining difficulty parameter, guarantees that nobody can
credit themselves with infinite bitcoins out of thin air. It takes effort (the
proof of work) to mine.

This is cruical
because on the one hand, it incentivices miners to provide the network. Without
miners, there wouldn't be a bitcoin network. Without a bitcoin network, the protocol
would be useless. Mining also provides a certain fundamental value for bitcoin,
because mining requires effort, i.e. expenses, it means that mining is an
economic activity with expenses and profit. This is where the underlying value
of bitcoin stems from.

Regarding a
"central authority" for "price control". This would violate
the principle that the network is self regulating. Because, it'd reqire
creating bitcoins out of thin air. This would compromise the network, because
miners couldn't trust that "authority", because miners have expenses,
and they need to estimate those expenses far into the future to stay
profitable. With a willy-nilly agency creating bitcoins out of thin air, mining
would not be economically feasible, because at any time it can throw off your
calculations of profitability. This would mean you end up controlling the
price, but you've no longer got a network.

Bitcoin the protocol
is useless without a network. And Bitcoin the currency is priced based on the
trust and economics people place in that network. So if you create a central
authority, you essentially destroyed bitcoin, completely.

But beyond that,
it's not like there are no atlernative cryptocurrencies. There are countless,
most of them clones of bitcoin with some variations. The matter of the fact is
that, none of them are terribly popular, they're very much an excotic niche,
and have remained to be that. The reason is that they either deviate too little
from bitcoin as to make it seem worthwhile, or that they deviate so much that
they're no longer bitcoin, and don't offer similar advantages.

And this is why you
don't understand bitcoin, why you probably will never understand it, probably
never write anything intelligble about it, and why your grand alternative
schemes for some modified bitcoin that makes it "all work" are
nothing but an uneducated pipedream.